Sweeping to power in January 2017, President Nana Akufo-Addo’s government was riding high on hopes for economic change and social progress. Almost two years later, the euphoria is over as his plans are weighed down by a creaky bureaucracy, partisan point-scoring and sums that don’t add up

Promising free secondary education, a reformed national health insurance scheme and a new factory in every one of the country’s then 216 districts, President Nana Akufo-Addo’s government was courting a crisis of expectations from the start. It had inherited a slow-growing and debt-ridden economy from the government of John Mahama. More than that, dissonant voices within Akufo-Addo’s own New Patriotic Party (NPP) saw its thumping parliamentary majority as a chance to push for their own interests.

Business wanted lower taxes – an end to the so-called nuisance taxes – while the public-sector trade unions wanted guarantees over jobs in the civil service and the dysfunctional state-owned enterprises. Even with an impressive turnaround – Ghana’s economy grew by 8.5% in 2017, more than double the level of the previous year – the government is far from delivering the wider transformation it promised.

While policy advisers are trying to get the reforms through the system, a much bigger matter dominates the thinking of party politicians: are Ghanaians better off than they were two years ago? As the election in 2020 nears, that measure will outshine all other issues.

The NPP’s 2016 manifesto offered visions of transformation in everything from fuel prices to corruption. A power crisis left much of the country sitting in the dark between 2014 and 2016 and compounded the effects of a 2012/2013 financial squeeze. The NPP said the situation would be better under an Akufo-Addo government: the economy would be managed effectively enough to finance high-quality education and health services.

Backlash from supporters

But NPP supporters are now among the loudest critics of the government. An entrepreneur from one of the party’s founding families who owns a start-up beauty business in one of Accra’s more affluent districts is blunt. “Things have ground to a halt,” she says. “I spoke today to one of my suppliers, and he confirmed to me what many other people have been saying: there is no money flowing through the system. There’s a general problem with cash payments from people who owe me, even those I’ve worked with for six months or longer. People who trade are having problems at the ports.”

Customs reforms at Tema and Sekondi have led to loud complaints from the Ghana Union of Traders’ Associations, an upstart rival to the established Association of Ghana Industries. And reforms by the Bank of Ghana have led to forced mergers of seven Ghanaian-owned banks, including at least one connected to the former ruling National Democratic Congress (NDC) – uniBank. More upheaval is possible before the end of the year, when regulatory benchmarks for minimum commercial bank holdings of capital reserves rise from ¢120m ($25m) to ¢400m.

Insecurity has crept into the market, heightened by events such as the early-October crash of Menzgold. The buccaneering precious-metals dealership, led by a twenty-something “creative arts” entrepreneur called Nana Appiah Mensah, had clashed repeatedly with the Securities and Exchange Commission, the precious-minerals regulatory agency and the central bank. All three claimed Menzgold was unlicensed and had no right to operate under their guidelines.

The company hired the international law firm Baker McKenzie and issued a defiant response to the bank’s directive ordering it to stop trading. The Menzgold fiasco triggered a mini-crisis, with depositors in cities rushing to their local banks, intent on withdrawing their money.

“The lack of liquidity stems from a lack of confidence in the local banks and Ghanaian institutions,” says the beauty-shop owner, who has laid off half her staff in the past couple of months. “In the past, even if your business didn’t make sense, you could find liquidity to plug the gap. Now people are sitting on their cash or moving out of the country.”

She lambasts the Bank of Ghana: “The reforms should have been done quietly and in a way that does not cause panic. […] The beneficiaries of this crisis are the foreign banks, which do nothing to prop up locally owned businesses. There’s actually a run on the banks but everyone wants to save their business so they don’t call a spade a spade.”

The state-owned GCB Bank has easily met the new capital requirements. Managing director Ray Sowah defends the central bank’s actions: “This environment does not want to accept that business was being done in a wrong manner. They want to see it as a niche market. There’s nothing like that. If Bank of Ghana does not regulate the market, we will all have ourselves to blame.”

Lessons in economics

Sowah argues that people had allowed themselves to get used to practices that were unsustainable: “[GCB] deposits have been going from strength to strength. But conservatism in terms of financial arrangements is the only sustainable way of doing business.”

The economist Kwame Pianim, an elder statesman of the NPP, is critical of the government’s approach to setting out its economic agenda. The governing party has failed to explain to people how the previous government did so much damage to the economy, says Pianim. “It was an economy with very unstable macroeconomic fundamentals. But the Akufo-Addo government did well in stabilising the cedi and improving the macroeconomy, giving renewed certainty to investors.”

Inflation shrank from 15.4% in December 2016 to 9.6% in April this year. The government debt edged down from 73% of gross domestic product in December 2016 to 69.2% by the end of 2017. However, ratings agency Moody’s predicts a rebound to 72.4% by the end of this year, driven by the cost of cleaning up the banks, and then a decline to 68.9% by the end of 2019.

The surge in growth in 2017 was powered largely by oil and mining. Ghana is expected again in 2018 to be among the fastest-expanding economies in the world – a return to form after a record-breaking 14% in 2011 as commercial oil production began under the then president John Atta Mills of the NDC.

“We also inherited strategic state enterprises that lacked the balance sheet to be able to do any meaningful business,” Pianim says, singling out the case of the perennially mismanaged energy sector. Boakye Agyarko, an ex-Wall Street banker who was dismissed as energy minister this year after a row in the government about the renegotiation of power deals, says the government is still ¢2.3bn in arrears on its energy sector debts and adds ¢60m to this debt every month. This is despite its issuing two bonds to clear legacy debt to the Electricity Company of Ghana (ECG).

Ill-advised cuts

According to Pianim, the Akufo-Addo government’s March 2018 cut in the electricity tariff worsened the situation. “[It] meant that ECG doesn’t collect enough money. ECG doesn’t pay Volta River Authority (VRA), the power generator. Then VRA doesn’t pay Ghana Gas, which also meant that at one point the Nigerian gas distributor WAPCo (West African Pipeline Company) stopped supplying us. If we had retained the electricity tariff where it was, we might have been able to start rebuilding the balance sheet of these strategic state-owned enterprises.”

Ghana’s national gas supplier is critical to plans for decentralised industrialisation under the government’s One District, One Factory programme. Agyarko says the cabinet is not yet committed to saving on the state’s energy bill and suggests that some close to government have a vested interest in the manipulation of the price Ghana pays for its industrial gas. It was those sorts of interests that controlled the gas prices under Mahama’s government, he argues.

Akufo-Addo’s government claims that its predecessor signed way too many power purchase agreements (PPAs), and that Ghana now has too much supply that it cannot use. The Accra government now wants to renegotiate and cancel some of those deals. If it is successful, it stands to make up to $7.2bn in savings on excess-capacity charges from PPAs over a 13-to-15-year period, at an estimated cost of just $520m, says Agyarko.

“Cancelling all liabilities was agreed in cabinet, cleared with the attorney general, and it was left to renegotiation of payment terms with the ministry of finance,” the former energy minister says. But this was followed by foot-dragging, he told The Africa Report in September, when terms were still not agreed.

At the Financial Times Africa Summit in London on 7-8 October, President Akufo-Addo announced that his government has accepted recommend­ations for a thorough review of the PPAs and now anticipates making $7.6bn in savings over a 13-year period. Critics say the government will not save nearly that much and may have difficulty cancelling deals.

Cheap gold, expensive cocoa

While the NPP has been critical of the deals the NDC agreed, the opposition lambasted a May 2018 tax break worth $259m that the government agreed with South African firm AngloGold Ashanti so that it would relaunch operations at the Obuasi mine, which was closed in 2014 due to disputes over security and artisanal mining.

As a former chairman of the Cocoa Marketing Board (Cocobod), Pianim laments the government’s timidity in addressing problems in the cocoa sector. Cocobod has an historical debt of up to $10bn, he says, accumulated by paying local producer prices consistently above the world price and exacerbated by alleged graft by past NDC-appointed officials. “We used to lose $300 for every tonne of cocoa we sell. This year, with our agreement to set a producer price in cooperation with Côte d’Ivoire, the situation has improved – we will lose $200 for every tonne of cocoa.”

Growing collaboration with the Ivorians also includes plans to process up to 50% of cocoa grown locally and engagement with an African Development Bank-backed programme aimed at attracting young farmers into the sector.

Akufo-Addo’s government will face heavy pressures to boost spending in the run-up to elections in 2020. Its graduation next April from International Monetary Fund supervision may presage a race to open the coffers and find treats for disillusioned party supporters.

The President and his team are trying to shift the spending emphasis away from direct handouts to the faithful to general social initiatives. The Free Senior High School programme launched last year has given 180,000 disadvantaged teenagers access to higher-level education, but also sparked a fierce debate about educ­ational standards and how the system can be financed. Some are calling for means-testing so that the better off will be forced to pay fees.

On 17 October, Akufo-Addo inaugurated the Nation Builders Corps, sending 100,000 unemployed graduates into a three-year public service training scheme. With the IMF’s backing, the government imposed a freeze on public-­sector hiring in 2015, pushing up youth unemployment. The Nation Builders Corps scheme is one interim measure. Although such social inclusion programmes may help the NPP’s political fortunes, the core measures of its success will be the effect on their pockets.

As Sowah of GCB says: “You have to understand that we are dealing with a populace who don’t care about structures. They are interested in food on their table and full bellies. So you can make all the noise you want but is it really going to do much? That’s the real issue that we have to confront.”

This article first featured in the November 2018 print edition of The Africa Report magazine